Polar Capital: Impressive FY22 despite market & AUM falls in Q4
Driven by a 37% increase in average AUM (from £16.7bn to £22.8bn), gross investment management fees* grew 33% from £157m to £210m. However, a drop in performance-related revenue from £44m in FY21 (a bumper year) to £14m slowed total revenue growth to 11% (£224m v £202m in FY21). Core operating profit (excl. perf. fees, other income, exceptional items and tax) jumped 35% from £52m to £69m while PBT fell from £76m to £62m, with the fall mainly as a result of the reduction in performance-related profits (FY21 £19m; FY22 £4m).Polar’s balance sheet remained robust, with net assets of £156m, cash and equivalents of £121m, and no debt. Full-year dividends totalled 46p, 15% up y-o-y, producing a yield of 8.8%.
Recent market and AUM trends have led us to reduce our FY23 AUM forecast to £19.0bn. This results in a drop in average AUM, revenue and profit from FY22 to FY23. However, given its strategic positioning and growth opportunities, we think Polar can re-ignite its growth trajectory and reach £25-26bn of AUM over the next four years or so. Our fundamental valuation is 800p per share, over 50 % above the current share price, but down from 1,000p.
Polar Capital Holdings is an investment management company providing professional and institutional investors a range of geographical and sector funds. Co. manages 25 funds and four managed accounts across a range of long only and alternative products. Co. has one class of business, being the provision of investment management and advisory services. As of Mar 31 2017, Co. had total assets under management of £9.27 billion.
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